FCA Fines Inspirational Financial Management and Bans Advisers for Poor Pension Transfer Advice

The Financial Conduct Authority (FCA) has fined Inspirational Financial Management Ltd (IFM) for giving poor advice to clients regarding transferring out of their Defined Benefit (DB) pension schemes, including the British Steel Pension Scheme (BSPS). The firm's actions have resulted in significant financial loss for many customers and led to two individuals being banned from advising on pension transfers.

IFM was found to have advised a large number of clients to transfer out of their secure DB pensions without properly considering whether it was in their best interests to do so. This was despite operating on a contingent charging model, where fees were only collected if the transfer went ahead, which benefited the firm and its advisers but put customers at risk.

Following a review by the FCA, it was found that 83% of IFM's pension transfer advice did not meet the minimum required standards. Out of 307 customers who were advised to transfer, 261 completed the process, with former adviser Arthur Cobill advising 245 of them, including 198 members of the BSPS. These BSPS members had pension benefits worth over £90 million.

William Hofstetter, one of IFM's directors, was responsible for compliance oversight and failed to prevent poor advice being given. As a result, both Mr. Cobill and Mr. Hofstetter have been banned from advising on pension transfers, and Mr. Hofstetter is also banned from holding any senior management positions in regulated firms.

In addition to the fines imposed on the firm and individuals, Mr. Cobill and Mr. Hofstetter have agreed to contribute £120,000 and £40,000, respectively, towards compensation for IFM's affected customers.

The FCA has emphasized the vulnerability of customers transferring out of the BSPS, given the uncertainty surrounding the scheme's future. It is expected that advisers such as Mr. Cobill and Mr. Hofstetter should take extra care in providing sound advice to protect customers' valuable assets and retirement provision.

Therese Chambers, Joint Executive Director of Enforcement & Market Oversight, has stated that pensions are a safety net that people spend their entire lives building, and it is the responsibility of firms and advisers to provide appropriate guidance. The FCA's actions against IFM and its directors show that they will take action against those who fail to meet the required standards and contribute towards compensating affected customers.